Innovation has become a priority theme for the OECD. It was the central theme of our Ministerial Council and our Global Forum in 2007. Bearing in mind the growing importance of innovation as a tool to power growth and meet the great challenges of globalisation, the Ministers of the OECD countries have given us a new mandate to develop an Innovation Strategy.

Our peer evaluations of each country’s innovation policies are the pillars which ensure that this Strategy is based on firm ground and that it is of practical use to public policy makers. To do this, we take into account the particular characteristics, best practice and experience of the Government of each country.

To promote better functioning of the world economy, we need a genuine global estimate of innovation for growth. The inclusion of non-member countries in our work is crucial in ensuring the quality of its results. In this regard, our Programme of Country Reviews of National Innovation Policies is an integral part of our strategy of broader-based and strengthened cooperation. In addition to Chile, we have already produced country studies of China and South Africa. At the moment, we are starting the review of Russia and another is planned for Brazil. The participation of non-member countries in our work on innovation is crucial in developing effective responses to the growing challenges of globalisation.

We have subjected Chile to review with the same rigour as we use to evaluate the most advanced member countries, with greater emphasis on the challenges and room for improvement than achievements to date. This approach based on constructive criticism is recognition that Chile is seen as a viable candidate for entry to the OECD.

Before sharing with you some of the conclusions and recommendations of the study, I would like to thank the Government of Chile - especially the Ministry of the Economy, the Ministry of Finance and the National Council on Innovation for Competitiveness - for the excellent cooperation they have provided during the review process.

As well as having access to high quality information, we were able to have valuable exchanges of views with representatives of the players most involved in the Chilean system of innovation. The preliminary report was discussed by the OECD Committee for Scientific and Technological Policy, with Finland and New Zealand acting as reviewers. The report was finally completed in close and efficient interaction with the Chilean authorities.

Allow me now to present you a brief outline of the main conclusions and recommendations of this interesting study.

I would like to begin by highlighting Chile’s excellent macro-economic performance during the last two decades. It was a performance based on important economic reforms and the building of stable institutions. The opening of its economy to global international trade flows and foreign investment stand out among the factors which explain the country’s macro-economic achievements and the world’s perception of them. Chile already has an economic and institutional system which places it at the head of the middle income economies.

To close the gap with the advanced economies, Chile needs to expand and consolidate the base for long-term growth by strengthening its capacity for innovation. The present difference in income compared with the advanced economies is chiefly due to low levels of productivity in Chilean industry. Recent studies estimate that forest and estate management in Chile, for example, is five times more labour-intensive than in the Scandinavian countries. Increasing Chilean productivity is key in achieving sustainable development in the long term, so as to end poverty and the persistent disparity in income distribution.

Innovation is the best way to increase productivity. The experience of OECD countries which, like Chile, have economies based on natural resources, shows that the only way to promote industrial diversification and micro-economic efficiency is by developing a sound and effective innovation policy. This is a key tool if Chile’s comparative advantages are to produce more value. The experiences of the wine and fishing industry are a fine example of how innovation can enhance a country’s comparative advantages.

Up to now, Chile’s achievements in innovation have not matched its success in other areas of the economy. The low level of research and development (R & D) in the Chilean economy (0.67% of GDP in 2002) is not only due to the difference in income compared with the advanced economies and the high dependency on industries based on natural resources. It is also a reflection, and let us be clear about this, of a degree of inefficiency in the national system of innovation which suffers from major imbalances and “bottlenecks” (as described in the study), including several years with a weak innovation policy.

These are challenges which the Chilean authorities are now addressing with determination. Today we can say that Chile’s innovation policy is at a turning point. Prior to the start of the nineties, Chilean innovation policy was quite basic. During the last 15 years, however, Chile has undergone a rapid learning process which has allowed it to introduce a more complete portfolio of instruments to address a wider ranger of objectives. This has meant adjusting to best international practice as well as developing its own best practice.

Although the innovation policy still needs to refine its priorities and equip itself in a more balanced manner, it has matured significantly in terms of the capacity of Chilean institutions to develop more effective policies. This makes it possible to contemplate a qualitative leap with regard to efficiency. However, Chile still needs to develop a firmer consensus regarding the role of innovation in the development of its economy and the Government’s role as promoter of innovation.

Some recent decisions, in line with international best practice, could be important catalysts. Special mention should be made of the Creation of the Nation Council on Innovation for Competitiveness and its exhortation to develop a long-term innovation strategy; the increase in public resources to implement this strategy; the fostering of innovation in the private sector with the introduction of a tax incentive for R & D. The study recognizes the important contribution of these measures and recommends further reforms to maximise their impact.

I would like to conclude this presentation by highlighting some of the many specific recommendations in the study.

Human resources development will be fundamental. Measures designed to develop the country’s human resources base are the cornerstone of any strategy of innovation for growth. As in other countries of Latin America, the lack of human resources is a major “bottleneck” for Chile’s social and economic development. Despite an improvement in educational performance in recent years, the quality of education is still inadequate. The study offers several specific recommendations on how to improve supply and demand for the highly qualified human resources required for science, technology and innovation.

Expanding and intensifying Chile’s comparative advantages is a key area in improving its capacity for innovation. Although there has been gradual sectoral diversification, with the development of the agro-food sector and export of services, the Chilean economy continues to face major challenges of diversification. The exportable supply continues to be limited compared with other emerging economies. The proportion of intra-industrial trade is still very low, much lower than in other countries of Latin America such as Argentina, Brazil and Mexico. A successful innovation strategy can play a very important role in facilitating structural change and reducing the risk of excessive specialisation

The recently established National Council on Innovation for Competitiveness and the Innovation for Competitiveness Fund have great potential to become powerful agents of change. It is therefore crucial that these institutions should be well placed and equipped. The study makes several recommendations in this respect. Participation in the work of the OECD and the current collaboration of the Council with the World Bank to improve the governability of the national system of innovation can help to strengthen these new institutions.

The system of public sector support should focus less on promoting innovation in well prepared and motivated companies. There is a need to help small young companies interested in developing their innovative capacity. This would require a combination of actions such as: support to these companies on questions such as the step from concept to prototype, industrial production and marketing; promoting development of markets for knowledge, including relevant institutions, and technological intermediaries; or making a clearer division of work between the National Council for Technological Research and Development (CONICYT) and the Chilean Economic Development Agency (CORFO), differentiating better between their respective funds and programmes.

These are just some examples of the type of conclusions and recommendations resulting from our evaluation. I invite you to read it carefully.

Ladies and Gentlemen,

The chief source of social progress in this new era is not tangible assets. It is the human mind, applied ingenuity, imagination. Intellectual capital is the comparative advantage of the future. The best investment that a country with Chile’s economic and human potential can make to meet the many challenges of globalisation is in promoting innovation. The OECD is there to help Chile in achieving this important goal.